A Summary of IFRS Conservatism: Analysis of Concepts & Evidence

This assignment provides a concise summary of a research article by Barker & McGeachin (2015) analyzing the role of conservatism in International Financial Reporting Standards (IFRS). The study aims to determine whether IFRS requires conservative accounting practices, considering the IASB's conceptual framework and existing literature. The reasons for undertaking the study include identifying the relevance of the conservatism approach and its impact on asset assessment. The findings reveal that while the IASB does not mandate conservatism, various recognition and measurement requirements in IFRS lead to both conditional and unconditional conservatism. The implications of the study highlight the effects of conservatism on financial reporting, providing insights for accountants on how it influences the presentation of financial statements. The assignment concludes by referencing the original research article, emphasizing its significance in understanding the complexities of conservatism within the IFRS framework.

Running head: QUESTION AND ANSWERS
QUESTION AND ANSWERS

QUESTION AND ANSWERS
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Table of Contents
1.Aim of the study......................................................................................................................3
2.Reason for undertaking the study............................................................................................3
3.Findings of the study...............................................................................................................3
4.Implications of the study.........................................................................................................4
Reference....................................................................................................................................5

QUESTION AND ANSWERS
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1.Aim of the study
The aim of this study was to whether financial reporting requires conservatism. This is done
in context with the IFRS accounting standards. The aim was to find the explicit and implicit
results of following the conservatism approach in recording the assets in the financial
statements. This was the majorly done for the firms who are involved in presenting the annual
reports for the general-purpose accounting. This has been studied in context with
international accounting also. The role of conservatism in financial reporting was
significantly studied in the article. The particular requite has been fulfilled by analysing
several accounting concepts and principles. It included the going concern concept, revenue
recognition concept and many more such research areas in IASB conceptual framework also.
2.Reason for undertaking the study
The major reason for undertaking the study was to know the relevance of the conservatism
approach in financial reporting. This has been studied after going through a lot of literature
research. It was supported by the IASB and any significant information about this research
was missing from the literature. Another reason for undertaking the study is to found the
effect of undertaking this approach for the asset's assessment in financial reporting. This has
been followed by searching for several studies in the past. There was no proper evidence if
this study in the literature. However, it has been measured in the study itself. It was found
that this is being chosen on the basis of the need by different organizations.
3.Findings of the study
The finding of the study lights sheds on the IASB considerations. According to the IASB, it is
not required for financial reporting to include the conservative accounting of their
framework. It is linked with the need of the organization and also on their choice. Moreover,
there was no significant information in the previous researches for this particular approach of
the accounting process. There are multiple revenue recognition examples that lead to the
conservatism approach. This is because it records the revenue when it finally occurs. The
conservatism approach also follows the understatement of the net assets on the basis of the
market value at that particular period of time. It is done by the accountant for the higher level
of verification of the financial statement on the basis of recognizing the profit and loss after
the revaluation. The need of the conservatism in the “private contracting demand” is being
recognized. Apart from this, it has been analysed that there are other forms of conservatism

QUESTION AND ANSWERS
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requires for this approach (Barker & McGeachin, 2015). It has been designated as the
incremental demand. This approach has been employed by the IFRS in accounting standards.
4.Implications of the study
The implication of this study is that it provides insights into the conservatism approach in
financial reporting. It will help to analyse the effect of the approaching towards conservatism
in the recording of the net asset if the organizations. Accountants could acknowledge that
how introducing conservatism could provide them good and bad news in the financial
statement.

QUESTION AND ANSWERS
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Reference
Barker, R., & McGeachin, A. (2015). An analysis of concepts and evidence on the question of
whether IFRS should be conservative. Abacus, 51(2), 169-207.